Minority-Owned Broadcasters Feel Crippling Effect of Performance Tax

Shantella Y. Sherman | 6/24/2009, 8:10 p.m.

As Congressional leaders debate legislation proposed by Congressman John Conyers (D-Mich.) on a Performance Tax, minority-owned radio stations have started to feel the pinch, and some are shutting down operations. In what some, including Radio One owner Cathy Hughes, call €a nail in the coffin of Black radio,€ the record industry would charge a performance tax €" or what amounts to a royalty fee - on each song played over the radio.

This fee is labeled as monetary compensation to artists, whose music has been played for free over airwaves for more than 80 years, but 50 percent of the fees would now go directly to the record companies.

Industry analysts say that the exorbitant amount of fees would disproportionately affect Black-owned radio stations negatively, and has already led to the demise of three Black Philadelphia stations just three days following the U.S. House Judiciary Committee€s 21 to nine vote to approve the Performance Rights Act. The stations were reportedly sold to Catholic churches due to an inability to pay performance fees.

€It is a means for the music industry to make money in the wake of digital swapping, downloading, and the loss of revenue from record / CD sells,€ said Cleophus €Cleo€ Freeman, 68, a retired record promoter in Oxon Hill, Md.

€Most of the American record labels are owned by foreign companies, so these people have no loyalty to the listeners. They have no heart strings connected to Black radio stations €" all they see is the bottom line €" which is more money.€

Conyers has supported the music industry€s bid for additional performance tax revenue for years.

€Music and culture is the other part of what makes you a human being. I never met anyone who didn€t believe that artists and performers shouldn't be compensated. Have you? This is what we're struggling with. We€re here to determine how we move past this,€ said Conyers at a town hall meeting in Michigan several weeks ago.

The fate of the bill in the House is still uncertain, even as amendments are being hashed out by Conyers, whose offices have been bombarded with calls and letters from fans of the Radio One conglomerate. Individual music artists have also started choosing sides in the debate over the legislation.

On one side, the Recording Industry Association of America (RIAA) is pushing for the fees; along with several artists. On the other side are Black-owned, college, religious, and community broadcasters, who are unable to pay the fees.

In a written and broadcast spot, Hughes explained that €the music that you now receive free from us - we would have to pay millions of dollars for. And in the midst of this economic depression, Black radio stations simply do not have that financial ability. There has been only one hearing on the bill and that hearing did not have any Black ownership representation,€ Hughes said.

David Honig, executive director of the Minority Media and Telecommunications Council (MMTC), said that even with the sliding fee scale, forcing minority-owned radio stations to pay royalty fees would cause at least a third of them to go out of business.

Stations with annual gross revenues of less than $100,000 would pay $500 each year. Those with gross revenues between $100,000 and $500,000 would pay $2,500. Those between $500,000 and $1.25 million would pay a royalty fee of $5,000 per year. In the original bill, stations with gross revenues of less than $1.25 million would pay a flat fee of $5,000. The fees would not start for three years if a station's revenues are less than $5 million annually, and for one year for others.

Complicating the debate even further is the urging by high-ranking House Democrats that the Treasury Department help bail out minority-owned broadcasters that are suffering from a lack of capital and lost advertising revenue amid the economic slump.

Citing the disadvantage the recession has placed minority-owned broadcasters under, and the ongoing call for diversity on the airwaves, several Congressional Black Caucus members, including James E. Clyburn (D-SC), have asked for a bailout similar to that of the auto industry.